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Obama hits ‘corporate deserters’

Lashing out at what he called “corporate deserters,” President Obama on Thursday increased the pressure on Congress to approve legislation targeting companies that change their address to slash their U.S. tax bill.

Obama, speaking at a technical college in Los Angeles, said corporations were taking advantage of a loophole not available to average workers — and in the process, forcing the middle class to take up more of the tab for infrastructure and job-training programs.

Obama’s comments put an even larger spotlight on the practice known as inversions, an issue that meshes well with the economic populist tone that Democrats are taking this election year.

The White House is echoing the push from congressional Democrats to enact anti-inversion legislation retroactive to May, and has brushed aside Republicans who say the cross-border deals should be dealt with in tax reform.

Tax reform, Obama said, is “going to take some time,” while the recent rash of inversions illustrates that Congress needs to act to stop those deals now.

“You shouldn’t get to call yourself an American company only when you want a handout from American taxpayers,” Obama said.

Congressional Democrats have been pounding the inversion issue since May, when the pharmaceutical giant Pfizer attempted to merge with AstraZeneca, a British competitor.

Since then, a string of other prominent companies, including the pharmacy chain Walgreen Co., have openly discussed shifting their legal address abroad, on top of the close to 50 companies that have inverted in the last decade or so.

Less than a week ago, the pharmaceutical company AbbVie closed the largest inversion yet — an almost $55 billion deal to merge with an Irish competitor.

But although Democrats clearly see inversions as a political winner, top lawmakers in the party also acknowledge they face an uphill climb in getting legislation passed this year.

The current threshold, set by anti-inversion legislation in 2004, is 80 percent. Hatch has said he’s open to a more targeted measure but won’t back retroactive legislation. Even some Democrats have also noted they think the problem would be better dealt with in tax reform.

Most congressional Republicans have stood firm against any targeted inversion legislation, instead saying the problem illustrates how badly the entire tax code needs to be rewritten. The real issue, they say, is the U.S.’s 35 percent corporate tax rate.

On Thursday, senior White House officials said Congress enacted retroactive legislation the last time they dealt with inversions a decade ago.

They added that companies that reincorporate abroad for tax reasons often change little about how they do business and remain heavily reliant on other U.S. resources, like education and infrastructure.

A White House official noted that, given that some smaller nations have slashed their tax code for corporations to basically zero, any overhaul of the tax code would need to contain a tough inversion proposal.

With that in mind, the White House official noted, Washington might as well start taking on inversions now — a step, the official said, which would also stop any “bandwagon effect” caused by the recent rush of inversions.

“There’s more safety in numbers,” the official said. “We should be acting as quickly as we can. That will buy us more time and space.”